“Wait, you want me to sell nearly all of my Amazon stock?”
“Yes, that’s correct,” I replied. “Keep 10% for play money if you like, but diversify the rest.”
“But Amazon is up over 300% over the last 5 years. The S&P 500 is only up 100%. Why on earth would
sell that? Clearly Amazon is beating the market.”
“We don’t diversify your company stock to maximize your returns. We diversify to de-risk your portfolio
and create predictable-ish returns,” I explained.
“De-risk my portfolio? What do you mean?”
“Warren Buffet says protecting the downside is the #1 rule of investing.
Ask anyone who’s worked at Enron or MCI Worldcom or Bear Stearns or Lehman Brothers if holding too
much company stock is a good idea.
All 4 companies were icons of their industry until they ultimately went bankrupt and their stock price went
to $0.
Do you really want to bet your entire financial future on Amazon stock?”
“No, I suppose not,” she reluctantly replied.
“For the record, once you have fully funded your Financial Zen Funds and have achieved full financial
freedom, THEN you can swing for the fences on individual stocks if you want.
Until then, the name of the game is de-risk and diversify.
Capish?”
“Capish.”
